Arup – five minute guide – rooftop and building integrated PV

Arup five minute guide rooftop PV

One of the last things that I did during my time at Arup was put together a five minute guide on rooftop and building integrated PV installations.  This has been uploaded to their website and can be found here.

When putting this together I got input from Arup folk around the world, pulling from an enormous pool of very competent people.

It’s free for use and distribution.

Building energy efficiency in Australia – a chat with Arup in Melbourne

MelbourneI, until very recently, used to work for Arup, an international engineering consultancy. So I’m using this travel opportunity to visit the various Arup offices around the world. So far I’ve been to the Sydney and Melbourne offices, and I’ll be heading off to Brisbane soon.

In Melbourne I met with Nick Adams, who focuses on buildings projects and heads up the mechanical services team. We had a good chat about what’s been going on in the Australian building sector with regards to energy consumption, and the various initiatives that have landed on Australia’s shores which seek to improve the energy efficiency of buildings.

I have been to Melbourne before, when I was much younger, in 2001, and, coming from small town Cape Town, I was blown away by the glass skyscrapers. They really were the enduring memory of the city that I had.

There is a Building Code of Australia and the “goal of the BCA is to enable the achievement of nationally consistent, minimum necessary standards of relevant safety (including structural safety and safety from fire), health, amenity and sustainability objectives efficiently.” This Code outlines the minimum performance specifications that new buildings have to comply with, effectively setting the lowest possible bar. As energy efficiency becomes more topical, Adams says that these minimum criteria are not difficult to meet, but that the Code has started to have an impact on Melbourne’s skyline, as the minimum criteria for energy consumption and building envelope design are now impacting whether buildings can get away with floor to ceiling glass façades.

In 2005 the Green Star rating system was introduced in Australia, providing building owners with aspirational targets. This has helped to drag the industry forward, but, as we’ve seen in South Africa too, there are certain negative aspects to it which come through as the sector starts to settle and mature. This largely relates to the tick box nature of rating a building according to sometimes onerous lists. It also results in certain interventions being selected because they tick a box, but they may not necessarily have any significant real world impact.

More recently, the US rating system LEED is being used more frequently, particularly by multi-nationals who have used LEED in other countries. The UK’s BREEAM tool is not commonly used in Australia, even by UK based organisations.

More recently, another US performance standard, the Living Building Challenge, is picking up popularity. This focuses on a building’s beauty, sense of place and efficiency. It’s harder to check or rate than the other tools.

Another one is the Well Building Standard; this looks at the health of the building, the enjoyment that the tenants get from occupying the building and their “health and wellness [should be] at the center of design.” It’s a hard standard to comply with.

Lastly there is the Commercial Building Disclosure programme. This programme “requires energy efficiency information to be provided in most cases when commercial office space of 2000 square metres or more is offered for sale or lease.” The aim is for prospective buyers or tenants to enter into a purchasing or leasing agreement fully informed. What this does is introduce the building’s electricity and energy consumption levels as a competitive element amongst building owners. Adams says that the real estate agents are latching onto energy statistics, and using this as promotional indicators for their clients.

Seems there’s a lot happening in this space.

[Thanks Nick for your time, and showing me the beautiful Melbourne skyline from your offices!]

Renewable energy tariffs dropped again by over 25% – how low can we go?

An opinion piece by my fabulous colleague, Johannes Horstmann, Transaction Advisor, Arup Cape Town:

In a long awaited announcement, which attracted intense media attention, the South African Department of Energy recently published the list of preferred bidders for Round 4 of the Renewable Energy IPP Programme – 415MW of solar photovoltaic (PV) and 676MW of wind projects will now soon be constructed.

Favourably to the economy, electricity prices have again dropped significantly. PV generated electricity will cost on average R786/MWh, 29% cheaper in real terms than round 3 projects. Similarly, electricity generated by wind is priced at R619/MWh, a drop of about 25% in real terms. This followed the trend of Round 2 and 3 where prices already fell by 30-40% in each round for both technologies.

A hot topic for the market is now: how far can this go? How will bidders price their projects in the next tendering rounds 5 and 6?

From a pure time trend perspective, it seems as if PV prices could decrease further by some 19% and wind by 8% in real terms, as shown in the graphs below. Those tariffs would follow a nice statistical learning curve, but can the market deliver these price cuts?

PV & wind ave tariffs

Developers and financiers will review their projects with regards to development cost, EPC cost, cost of capital, O&M expenditure and potential energy yields on a case-by-case basis. However, the market is maturing and is becoming more and more competitive. The DOE received 77 bids in August 2014 and only awarded preferred bidder status to 13.

From market responses, transaction costs and return on equity have decreased and are starting to resemble international benchmarks more closely, as healthy competition is still inducing development efficiencies. Favourable project development locations are also becoming scarcer with incumbent projects having secured the best areas, limiting the potential to improve energy yields further. In addition, grid connection is now becoming more difficult, creating cost pressure for developers.

International learning rates (the level of cost reduction when doubling the capacity), estimated and published by institutions such as the IEA or IRENA, are currently between 18-22% for PV and between 5%-9% for onshore wind. These global trends and the capacities for the next bid windows could translate to levelling out bidding prices. PV tariffs could decrease by ‘only’ 6% that would just cancel out inflation effects.

Notwithstanding the above, this aligns with the IRP update report for Crystalline and Thin Film module costs (7% and 6% decrease per annum, respectively). Wind prices could fall by 3% in real terms or a slight first-time rise in nominal terms.

0000417342_resized_arupgraphs2

It is also worth benchmarking the South African practice with international markets. DEWA, the Dubai Electricity and Water Authority, announced in January this year a new world record for solar PV. It awarded a consortium, led by Saudi Arabian’s ACWA power, a 200MW project based in the UAE for not-yet-seen 5.84 USD-cents/kWh. Notwithstanding, the consortium has an advantage over the developers in South Africa – financing cost. The availability of a 27 years tenor for a loan of $344 million and a 4% interest rate are the biggest factors for the low bid.

To illustrate this, with a shorter tenor of 15 years, higher interest rates of 10% and amid higher inflation of 6% (as seen in the South African market), indicative modelling shows that ACWA power would have needed to bid with c7.2 USD-cents/kWh. This is interesting, because this is exactly the average PV price of the latest Round 4 projects, in 2014 USD terms.

In conclusion, based on the above observations, South Africa may now have reached global best-practice benchmarks and future prices may follow closer to those internationally observed market movements. These international learning rates may be much less than the cost reductions experienced in the past few years. Developers and financiers will follow these trends with great interest to inform their own future bidding strategies.

This projected change in trends should not be discouraging but rather be seen as a reflection of the positive development of the renewable energy programme in South Africa, and the positive impact the REIPPPP is having on the South African economy as a whole. A strong regulatory environment for renewables has led to this market confidence that increased competition and drew investors and project development companies to South Africa. It shows the achieved efficiency of the IPP programme and provides confidence for the prospects of new IPP programmes for coal and gas that are currently being implemented.

Arup is an independent firm of designers, planners, engineers and technical specialists that makes up the heart of the creative force of many of the world’s most prominent projects in the built environment and industry. Good planning is at the heart of regenerating cities, towns and rural areas to establish long-term social, economic and environmental sustainability. Its international network of inventive and highly skilled specialists marries global factors, such as climate change, with local needs to create strategies that are efficient, exciting and practical. For more information, go to www.arup.com/Global_locations/South_Africa.aspx.